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Online Payday Loans May be Scams

November 19, 2012
Plain English Version

Whether the invitation comes in the mail or on the Internet, beware of pitches urging you to apply for cash.

A new scam is developing. People are getting mail that looks official: “Confidential materials enclosed. Unauthorized use strictly prohibited.”

Open it up and you may find a plastic “credit” card with your name and a reservation number on it. The letter invites the reader to “get up to $500 in your checking account by tomorrow.”

The company sending you the letter is after your personal information, such as your social security and bank account numbers. It creates a completed application  with your information. It then sells it to a company that may or may not be in the business of making high interest loans to consumers.  Sometimes the applications are sold for the purpose of sending scam email.

These companies are called “lead generators.” The reason the number of companies doing this is growing is that federal and state regulators are paying more attention to the storefront payday loan places.

It is not clear where these companies are located. They may not even be in this country. Sometimes they do not even disclose the interest rate borrowers are to pay. As in many payday loan schemes, people may have to borrow more to pay back the first loan.

Credit counselors agree this is a road to disaster.

The Los Angeles Times

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